SAPA Conference – Montecasino
17th – 18th August 2011
WealthUnearthed
WHO IS AELMS?
• company founded in 1894
• part of AE&CI – now known as AECI
• world leader in explosives and initiating
systems manufacture and development
business units include…………..
• BEE partnership with TISO – 25.1% share in
AELMS
Southern Africa Business –
narrow reef
Southern Africa Business –
surface operations
and the Africa and
International Business
Units……
South America
EuropeSouth East Asia
Africa
expatriate pay
but why expatriation?
Is it to work in exotic
locations and travel
the world?
expatriate pay
there is the other
extreme………
expatriate pay
one of the main factors in any
expatriation assignment is………
expatriate pay - agenda
calculation methods,
delivery and
consequences
expatriate pay
The most common types of pay in use:
• Home country based
• Host country based
• Dual – higher of home or host
• Hybrid
• Select country based
• More than one approach
expatriate pay
ECA newsline - March 2008 lead article by Natarajan Sundar (independent
consultant)
“The most widely used method for determining
assignee pay is the „home country approach‟ (used
by 60% of companies globally and 75% of US
companies)”
“Globalisation is, however, putting this time tested
method under increasing scrutiny”
“As a result, companies are increasing adopting
hybrid or other arrangements……………….”
expatriate pay
52%
57%
61%
11%
10%
9%
6%
6%
12%
10%
8%
3%
5%
3%
2%
16%
16%
13%
2009
2007
1995/6
TYPES OF PAY IN USE – ONE APPROACH OR MULTIPLE?
Home country based Host country based
Dual (higher of home or host) Hybrid
Select country based More than one approach
expatriate pay – home build
upHOME
taxtax
X cost of
living
index
hardship
benefits
taxtax
HOST
net base
salary:
spendable
non-
spendable
benefitsbenefits
non
spendable
non-
spendable
60%
40%
TO GHANA UK RSA Australia Indonesia
Net £41,359 R 340,000 AUD 62,450 347,673,447
40% non-
spendable£16,544 R 136,000 AUD 24,980 139,069,379
60%
spendable£24,815 R 204,000 AUD 37,470 208,604,068
CoL index 112% 135% 128% 130%
Spendable £27,793 R 275,400 AUD 47,962 271,185,289
H/ship 20% £10,471 R 90,231 AUD 18,000 84,712,919
Net package £54,807 R 501,631 AUD 90,942 494,967,587
% of net 133% 148% 146% 142%
US$ $88,788 $73,769 $84,834 $59,396
expatriate pay
So what is a “hybrid”
approach as opposed to a
“home base” build up
approach?
expatriate pay – hybrid
TaxTax
X cost of
living
index
Hardship
Benefits
TaxTax
HOST
Base
salary
40% non-
spendable
BenefitsBenefits
RSA
Base
salary
40% non-
spendable
BenefitsBenefits
TaxTax
UK
60% 60%
expatriate pay – effects of
the two applicationsapproachFrom To Net pay Build Up
% of
home
base
Hybrid
% of
home
base
UK GHANA £41,359 $88,788 133% $88,787 133%
RSA GHANA R 340,000 $73,769 148% $81,987 164%
AUST GHANA AUD 62,450 $84,834 146% $77,242 133%
INDO GHANAIDR
347,673,447$59,396 142% $78,675 189%
expatriate pay
31%
33%
25%
22%
8%
5%
36%
40%
Overall
Home country base build-up approach
CURRENCY OF PAYMENT
All in home country currency
All in host country currency
All in a 'third country' currency
Package is divided into home country and host country currency elements
expatriate pay
HOW DO YOUR
EXPATRIATE SALARIES
COMPARE WITH THE
MARKET?
net salary lines
net salary lines
net salary lines
GHANA
INDONESIA
expatriate pay- reasons for
assignment failure
• Family issues 37%
• Lack of skills/competencies 23%
• Expectations of job not met 16%
• Local culture incompatibility 12%
• Isolation 5%
• Compensation issues 3%• Partner career issues 3%
• Security concerns 2%
expatriate pay – the changing
expatriate landscape
• Growth of new and developing markets – emergence of
BRIC countries as a top destination.
• Developing countries expatriating own employees
• The traditional expatriate stereotype has changed to
include dual income couples, single employees, same
sex couples, single parents
• Education, partner‟s careers, family adaptability have
been major reasons for failure and these issues have
become more important over time
• Talent and retention becoming critical issues
Other factors to be taken into account:
expatriate pay - tax
• Agreeing taxation policies and methodology is key
before any assignment
• Policies should differentiate laissez faire (pay own tax),
tax equalisation (company assumes tax liability) and tax
protection (company pays the tax difference between SA
tax and host country tax)
• To encourage mobility among assignees, tax equalisation
is best and ensures that the assignee does not seek out
tax friendly assignment countries
• Contractual arrangements (contracts) must set out the
tax requirements and obligations for both employer and
employee
expatriate pay - tax
• SA resident taxpayers must ensure they maintain tax filing in
SA and submit returns annually
• If the expatriate does not file returns in SA when tax directives
are being sought (such as pension payouts) there may be
issues
• Payroll – the SA payroll should mirror what happens on the
host country payroll
• To reduce reputational risk in the host country, the employer
should ensure that tax advisors are appointed to assist with
the taxation requirements in the host country
• Note: Double taxation agreements between countries and the
183/61 day rule
Overall, the remuneration method should:
• be effective in attracting and retaining staff, particularly those
in key disciplines
• have the ability to facilitate the transfer of international
employees in a cost effective manner across regions
• take into account equity and ease of administration
• be able to cope with changes in cost of living and exchange
rate volatility
expatriate pay
Get the basics right – the Policy
* A single, comprehensive expatriate policy that covers all
aspects of remuneration including pay calculation and
delivery, housing, return flights, education, loss of
spouses earnings, benefits etc is the VERY FIRST STEP
* The policy should be published on the intranet, or
equivalent
* Doing so provides a clear, transparent simple framework
and a clear point of reference
* It reduces expatriate queries and dissatisfaction
* Exceptions are dealt with in the context of the underlying
philosophies and the intent of the policy
* The policy MUST integrate with other business strategies
expatriate pay
expatriate pay
IS THERE A
“RIGHT WAY”?
SAPA Conference – Montecasino
17th – 18th August 2011
Thank you